COVID-19 – Canadian Tax and Business News, release #20
Our COVID-19 Canadian Tax and Business News updates are our way of informing our clients, friends and business associates with recent information that may help businesses and individuals while coping with the outcomes from the COVID-19 pandemic.
Our goal is to monitor the news and release relevant information as it becomes available.
The summary below is based on our understanding and interpretation of the announcements made by the government. The information below is in summary form and subject to change until the proposals are passed as legislation. Contact one of our professionals to discuss these matters in the context of your situation before acting upon such information.
Tax Payment Deadline – September 30, 2020
Reminder that the payment due date for income tax amounts owing, including instalment payments, is September 30, 2020. Penalties and interest will not be charged if payments are made by the extended deadline of September 30, 2020. The Canada Revenue Agency (CRA) will also not impose late-filings penalties provided the return is filed by September 30, 2020 and payment is made by the deadline. This payment deadline extension applies to current year individual, corporate and trust income tax returns.
CEWS Audit Projects Underway
This fall the CRA has commenced audits of the Canada Emergency Wage Subsidy (CEWS) support claims. A copy of the CRA Audit Letter has been circulating amongst the tax community. The daunting letter is 9 pages long as includes request for a significant amount of information. We have highlighted some of the major items below but please refer to the letter for detailed information:
- Minute book information including organizational chart for the corporate group, shareholder registers, agreements related to inter-corporate and employee loans
- 2019- and 2020-year end financial information including general ledger, trial balances, monthly sales reports, general journals, etc.
- Support for how a business computed its revenue decline percentages
- Payroll journals including proof of payroll payment to employees
- Bank statements for all CEWS periods and the baseline period
This information request is similar to a large scale CRA audit and will be difficult to comply with as the CRA expects the information within 10 business days. If you receive a CEWS Audit Letter and need assistance responding, please contact us.
CRA Resumption of Services
The CRA will resume various services this fall including collection actions, audits focusing on aggressive tax planning arrangements using partnerships and trusts, audits in the real estate sector in Vancouver and Toronto, objections, CPP/EI appeals and taxpayer relief programs. Also commencing in October, the GST/HST Delinquent Filer program will begin and refunds on non-compliant accounts will be held.
COVID19 & Home Office Expenses
The CRA has commenced consultations on the administrative process for individuals to claim home office expenses as a result of having to work from home during the pandemic. Current rules require an employer to complete a T2200 form to confirm an employee is eligible to deduct employment expenses. The CRA is considering a short form COVID T2200 which will confirm an employee can deduct home office expenses as a result of working from home due to COVID19. CPA Canada is working closely with the CRA to introduce a more streamlined solution as millions of forms will be required to be completed. The time to prepare these forms is also a concern CPA Canada is addressing with the CRA. Stay tuned for more details once the consultation has concluded.
SR&ED Deadlines Extended
The Minister of National Revenue provided for an extension to claim SR&ED and investment tax credits that were otherwise due on or after March 13, 2020. The deadlines have been extended six months and cannot extend beyond December 31, 2020.
For example, corporations with tax year ends from September 13, 2018, to December 31, 2018, that had a SR&ED reporting deadline from March 13, 2020, to June 30, 2020, are extended by six months from their original due date. Corporations with tax year-ends from January 1, 2019, and to June 29, 2019, that would usually have a SR&ED reporting deadline from July 1, 2020, to December 29, 2020, are extended to December 31, 2020. The CRA has posted further information for individuals and trust extensions on their website.
Statute Barred Period Extended
In the September 12, 2020 Canada Gazette, the Minister of National Revenue has extended the normal reassessment period for tax returns that become statute barred on or after May 20, 2020. Generally, returns become statute barred after three or four years from the date of assessment depending on the taxpayer. In response to the COVID19 disruption, the normal reassessment period has also been extended six months. For example, a tax return that would normally become statute-barred on September 30, 2020 will not become statute-barred until December 31, 2020. In contrast, a return that would otherwise have been statute-barred on May 31, 2020, will become statute-barred on November 30, 2020.
As we all try to stay safe, we need to remind ourselves business will get back to normal but in the meantime lets all do our part to get to normal as soon as we can. If you have any questions or require further information, don’t hesitate to reach out to us.